“Netflix
could be losing $2.3 billion because of password sharing. Amazon is
giving up $540 million, while Hulu is losing $480 million” [1]
Global TV piracy is
still running rampant, despite more prosecutions and more sites being
systematically closed down. - And then there is the emergence of new
next generation apps such as OONA Free Mobile
TV, which offers users 100s of free top international and local
channels, and even rewards users with a virtual currency, just for
watching what they love. - This is a giant step in the onslaught to
negate the piracy problem, as it magically removes the need for
anyone to watch looted TV shows, and there is no risk of prosecution.
And in the not too distant future, there are likely to be new high
tech measures to make the pirates walk the plank for good. But what
about password sharing? Well, free platforms such as OONA TV are set
to make this practice redundant.
Putting a Spotlight on the Revolving Password Game
Recent research
undertaken by CordCutting.com involving Amazon, Hulu and Netflix,
indicates that a whopping 20% of viewers who are streaming video from
Netflix, Hulu or Amazon, are using another user's digital video
account password. "Cordcutting.com says
children of parents who have streaming accounts on Netflix and Amazon
are the most active when it comes to password sharing. For Hulu, it’s
one’s “significant other” [1]. And when it comes to duration: “Netflix tends to be
used in password sharing for 26 months on average; Amazon is at 16
months and Hulu at 11 months” [1]. As a result, the financial
losses hitting these platforms are enormous, and this surely has
repercussions for those who do pay their subs, in that they may be
subject to a price hike. For example, in January of this year,
Netflix stated that: “it was raising its prices in the U.S. by 13
percent to 18 percent. The cost of its most popular plan will rise to
$13 a month from $11. The price of the cheapest plan will go to $9 a
month from $8” [2].
“We
love people sharing Netflix, Reed Hastings, CEO, Netflix, said in
2017. “That’s a positive thing, not a negative thing”
It would seem that in
the past, Netflix actually encouraged it. - But did the movers and
shakers behind the company do the math? The fact of the matter is
that: “Netflix owes $28 billion
in coming years to pay for programming, its debt and other
contractual commitments” [3]. - So
this state of affairs begs a number of questions: Did the
chiefs envision various scenarios, such as a college students sharing
their password with 10 of their class mates? Did they consider the
cost of raising funds for their global expansion? Did they give their
investors a second thought when they decided on becoming mega
gamblers? Will their free-for-all cash bonfire just keep get bigger?
As Shira Ovide, writing in Bloomberg, puts it: “A company tends to rely on the cash
generated by its business to pay its bills. But Netflix can't and
won't pay its own way. At its peak year of free cash flow, it would
take Netflix 100 years to pay all the money it has committed to
spend” [3]. Now that is a serious number...
Image credit: Bloomberg
To put this into
perspective, we only have to look at Disney as an example: “Its
contractually owed payments are about 10.5 times its highest-ever
free cash flow” [3], so this is a far more realistic situation than
Netflix. But do Netflix supporters actually believe that will take
the company a century to settle its bills? Do they have some sort of
assurance that Netflix will spread far and wide, become mega
powerful, and ultimately turn into an unstoppable gigantic cash
machine that will have far more reserve funds on account than its
financial commitments? “Contrasting Netflix's cash generation - or
lack thereof - and the hard cash it owes in coming years is meant to
illustrate the gamble Netflix is taking with investors' money rather
than its own” [3]. “Overall, Netflix now has 139
million paying members” [4].
Image credit: Atlas
For those who invested in Netflix in 2007, when it initiated its streaming service, it has been all smiles, but we are now approaching 2020, and the industry is going through an evolution. Only time will tell
which way it will go, but with the number of substantial new players on the horizon, all bets on Netflix should be cautious. Contenders include platforms such as the ad-based (and premium option) cutting-edge service, OONA Free Mobile TV. - This innovative player is
currently set up to serve 185 million Indonesians, and is firmly on
course to go global and provide its futuristic service to billions of people in other parts of Asia, the US, South America, Africa, the Middle East and Europe. Further, Netflix is due to face stiff competition from the likes of AT&T
Inc.’s Time Warner, Apple Inc., Walt Disney Co., and others, which will
offer superb programming, give consumers lots of options, and use high tech [2], - so to that end, there is a realistic chance that
Netflix will fall down in the ranks. Watch "Shares of Netflix drop today after downgrade, is this the end of the NFLX binge."
Moreover, the tech, entertainment
and media companies that are like killer sharks swimming into Netflix’s waters, still
remain a threat, and can serious damage the number of new
global subscribers that Netflix hopes to attract. And what will be
the state of play with Netflix investor's then? Further, major
players such as Time Warner and Disney are set to remove a number of
their top programs from Netflix, so they can use them on their own
video services. - And that will not go down well with subscribers. This, added to the recent trend of more platforms
shelling out mega bucks for TV films and shows, will send Netflix’s
expenses skyrocketing. So will the company's honchos still promote
sharing passwords if Netflix has to face the music and stop being
financially irrational, or will they be putting in an urgent order for new software? [2]. You decide...
Image credit: Variety
[1].
Friedman, Wayne (2019). Media Post. “Is Password Sharing Of
Streaming Video Good Or Bad For The Industry?”
[2]. Ovide, Shira (2019). “Netflix’s Simplicity Is Its
Secret Weapon.” Bloomberg.
https://www.bloomberg.com/opinion/articles/2019-01-15/netflix-s-simplicity-is-its-secret-weapon
Accessed 7 Mar. 2019.
[3].
Ovide, Shira (2018). “Let's Get Real About Netflix's
Numbers.” Bloomberg.
https://www.bloomberg.com/news/articles/2018-04-16/let-s-get-real-about-netflix-s-cash-and-spending-numbers
Accessed 7 Mar. 2019.
[4]. Rodriguez, Ashley
(2019). “Netflix’s price hike was perfectly timed.” Quartz.
https://qz.com/1527021/netflix-q4-2018-earnings-netflixs-price-hike-was-perfectly-timed/
Accessed 7 Mar. 2019.
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